However I can't drag windows between them. xfce recognizes the 2'nd screen and I can change the background and such (there is no panel or trash there though).When I try to drag a window to the right, it just moves to a virtual workspace instead).

It also worked for me. A couple of tips; running from the standard menu (System > NVIDIA Server Settings) had no write authority in /etc/X11, so I opened a shell, su'd to root and then ran nvidia-settings. Also I got the best results by choosing mode TwinView.